Spring Forecast 2025

Company car (also known as Benefit-in-Kind (BIK) tax) is based on a car’s P11D (list price) and CO2 emissions, with the BIK percentage rates for all company cars shown in the table.

From 1 April 2025, BIK tax rates for cars with zero emissions, e.g., EVs, will be set at 3%. Thereafter, the rates will rise by 1% per year until 2027/28, 2% in 2028/29, and a further 2% in 2029/30.

For cars with CO2 emissions between 1-69g/km, BIK tax rates will rise by 1% per year until 2029/30.

Meanwhile, for cars with CO2 emissions between 70-74g/km, BIK tax rates will increase by 1% in 2025/26 and a further 1% 2026/27. The rate will then be held in 2027/28 before increasing by 1% per year until 2029/30.

The BIK tax rates for cars with CO2 emissions from 75g/km will increase by 1% from 1 April 2025 and remain unchanged for two years before rising by 1% per year until 2029/30.

The top rate of BIK payable, which was capped at 37%, will increase by 1% per year from 2028/29.

For non-RDE2 (Real Driving Emissions Step 2) diesels, a tax charge of 4% will continue to apply.

Example: 

A fully electric car with a P11D value of £48,495 and CO2 emissions of 0g/km. Its BIK band for 2025/2026 is 3%. £48,495 x 3% gives a taxable value of £1,455 and yearly BIK tax of £291 (£24/month) for a 20% taxpayer, or £582 a year (£49/month) at 40%

HMRC Approved Mileage Allowance Payments (AMAPs) – the tax and national insurance contribution-free amounts claimable by a driver using their own car for business mileage – are shown (below) for 2025/26.

Up to 10,000 miles         Over 10,000 miles

45p                                                  25p

Class 1A National Insurance Contributions (NIC) 

Class 1A National Insurance Contributions, payable by the employer on the company car benefit and employer-provided private fuel, rise from 13.8% to 15% on 6 April 2025. The threshold from which NIC must be paid is reduced from £9,100 to £5,000. Smaller businesses will benefit from an increase in the Employment Allowance from £5,000 to £10,500 from April 2025.

As electricity is not classed as a fuel, there is no fuel benefit charge for employer-provided electricity, so employees will not be taxed on that provision and there is no Class 1A NIC to pay in 2025/26. 

For plug-in hybrid cars, the zero-emission range affects its taxable value and the NIC payable. However, the 2024 Budget announced that, in April 2028, the mileage-related scale is abolished and all cars with CO2 emissions of 1-50g/km will have their taxable value based on a rate of 18%, rising to 19% in 2029/30. 

Double Cab Pickup Trucks (DCPU)

In the 2024 Autumn Budget, the Government announced that double cab pickup trucks (DCPUs), including models often referred to as extended, extra, king and super cab pickups, will be treated as ‘company cars’ for BIK tax and capital allowance purposes from 6 April 2025. Drivers of 100% electric DCPUs with a payload of over one tonne will pay BIK tax at 3%. 

Transitional BIK arrangements will apply to anyone who has purchased, ordered or leased a DCPU before 6 April 2025. This means they will benefit from the previous Government support until disposal, lease expiry or 5 April 2029, whichever comes earliest.

Vehicle Excise Duty (VED)

A VED rate of £345 for petrol and diesel vans (registered from 1 March 2001) will apply in 2025/26. This will also apply to zero-emission vans.

Benefit-in-kind (BIK) tax 

The Van Benefit Charge (VBC) for those driving a company van for private use is set at £4,020 in 2025/26. The VBC for private fuel use is set at an extra £769. The monthly tax payable is shown below:

Monthly BIK tax (excl. fuel) £67.00/£134.00

Monthly BIK tax (incl. fuel) £79.82/£159.63

Figures shown for 20%/40% taxpayers

Class 1A National Insurance Contributions (NIC) 

Class 1A NICs are calculated based on the 2025/26 Van Benefit Charge – £4,020. The amounts due are calculated by multiplying the VBC by 15%, with the rates shown below.

Annual Class 1A NIC (excl. fuel)                   £603.00

Annual Class 1A NIC (incl. fuel)                    £718.35

Example:

A plug-in hybrid car, with a P11D price of £49,055 and WLTP CO2 emissions of 19g/km, has a zero-emission range of 62 miles, will have a BIK tax percentage of 9% in 2025/26. £49,055 x 9% gives a taxable value of £4,415. Multiplying by 15% derives annual Class 1A NIC of £662.

A grant is available for 35% of the purchase price (up to a maximum of £2,500) for vans weighing up to 2.5 tonnes, which have CO2 emissions of less than 50g/km, and can travel at least 60 miles with zero emissions. 

The same grant is available for vans weighing between 2.5-4.5 tonnes, which meet the same criteria, up to a maximum of £5,000.

Workplace Charging Scheme (WCS)

The WCS reduces the cost of a new workplace charging station by 75%, capped at £350 per socket. The scheme is administered by the Government Office for Zero Emission Vehicles (OZEV) and applies to any businesses, charity, public authority, or small accommodation business in England, Scotland, Wales and Northern Ireland, until 31 March 2026.

Electric Vehicle Chargepoint Grant (EVCG)

The EV Chargepoint Grant is open to people living in flats (including those with mortgages) and rental accommodation. Those in single-unit properties such as bungalows and detached, semi-detached or terraced housing are no longer eligible for the grant. Visit Gov.uk for grants available to your customers.